Response to the Bank Chairman

TRANSCEND MEMBERS, 4 Feb 2019

Dr. Naresh Jotwani – TRANSCEND Media Service

4 Feb 2019 – The Chairman of a large global bank recently gave a TV interview about the state of the world economy ^[1]. Not surprisingly, the Chairman gave what was intended to be a sound and learned justification for a world order characterized by barrier-less trade.

However, the justification came out as being utterly sophomoric in its quality. That is to say, it was not too different from how a privileged undergraduate might argue in a college debate. Only the mannerisms were different – the uncle spoke, not the nephew or the niece.

During the interview, the Chairman championed the cause of ‘openness’ as applied to trade.

But ‘openness’ also applies to minds, to ideas and to debate. Therefore – in the spirit of this broader definition of ‘openness’ – the author is setting down below the points in which he found the Chairman’s justification lacking in clarity or in comprehension.

Many points were made by the Chairman during the interview. Against these points – quoted verbatim – we have set out below the doubts and questions which those very points would generate in the mind of any knowledgeable person of the world.

During the interview, the main groups of people which appeared in the Chairman’s world-view were the following:

1. Ordinary people – whose main concern is keeping their personal and family lives going, and who do not, or perhaps cannot, understand the complexities of the globalised world.
2. Politicians – who should ensure the public good, but usually fail to do so.
3. The rich – who would invest their wealth in the society’s future, but only if governments did not raise taxes to a level at which the rich would rather consume than invest.
4. The experts – who understand exactly how the complex world economy works, and can be relied upon to bring about the future wellbeing of the ordinary people.
5. Missing from action: Curiously – given that a bank Chairman was speaking – bankers did not make any appearance in the world view; presumably, that group is included within 3 and 4.

With that background, we have set out below the Chairman’s words in italics.

Point-wise, the Chairman’s words are followed by the doubts or questions which they can raise in any intelligent person’s mind. For the reader’s convenience, these points are numbered from 1 to 18, and given short and appropriate sub-headings.

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1. The ‘integrated world’: … (it is) against the nature of the integrated world to have barriers and to create trade tensions …

Response: In the family of nations, interests sometimes align and sometime come into conflict. Scarce resources must be shared in a manner which is acceptable to the parties concerned. To believe that barrier-less trade solves all the problems between nations would be naïve in the extreme. What does the good banker think about trade sanctions? Surely they are against the spirit of free trade? Does he advocate for the removal of all trade sanctions? Were the Opium Wars justified in the cause of free trade?

2. The implied world view: So together, the rising debt which is fragility of the financial system and rising trade tension, which is fragility of the trading system can translate itself into fragility of the world international order and that’s something to watch for.

Response: Do only these two aspects define the current so-called ‘international order’? Why should hunger, conflict, homelessness, forced migration, dehumanizing poverty, drugs, human trafficking … et cetera … NOT be considered as aspects of that same order?

3. Perceived risk: If we are not going to change something, this will not end up nicely … we need to change, because there is too much to lose…

Response: Large segments of humanity are today left with nothing more to lose! For them, things have ended up badly already! The current world order has failed them.

4. 2008 financial crisis: In a way, what we should always have is the memory of that event so that we don’t repeat the mistakes. It is in the sense that it will stay with us. However, many of the flaws that characterize especially the financial system have been remedied, but the problem is that the crisis of tomorrow will not be the same as the crisis of yesterday, so we need to deal with resilience.

Response: The good banker says that the enormous debt levels constitute a major part of the current crisis. If ‘many of the flaws … (of) the financial system have been remedied’, then why is the world once again facing an even larger debt burden? Is that not caused by mindless speculation? How does mindless speculation bring about the well-being of a society?

5. Dealing with crises: … there is a crisis prevention phase, there is a crisis management phase and there is a crisis resolution phase. Crisis prevention is the most important one and it’s the most boring one.

Response: The boring ‘crisis prevention phase’ is precisely when clever operators and speculators are busy harvesting wealth and thereby building up the crisis – for the paid politicians to manage and/ or resolve, always at public expense.

6. Politicians: Politicians wake up normally only when they see danger and if you tell them “just prevent the danger”, they say “we don’t see the danger, what is the problem”? So that’s something to watch for.

Response: This statement is truly mind-boggling in its attempt to deceive. With a totally deregulated financial sector, what can mere ‘politicians’ do to ‘prevent a crisis’? We all know that it is the financial sector which lobbies aggressively for deregulation.

If the system is so complex that only experts can manage it, as stated elsewhere, how can mere ‘politicians’ be expected to understand the oncoming crisis and prevent it? A clear case in point is the financial crisis of 2008. Even ‘experts’ were denying that anything was amiss.

7. Inequity, exclusion of large parts of population: This is something which is par excellence public policy challenge that needs to be addressed.

Response: That sounds like passing the buck – par excellence – except for the injunction made later that taxes on the rich should not be raised.

8. Leadership: … somehow large parts of the population feel that they are not being led properly, which means there is this kind of aura, which I am not sure is correct, which means there is the aura of our leaders have failed, experts have failed …

Response: That is not an ‘aura’, but a fact. Rest assured that it is correct.

9. Suggested solution: … the world is very complex. You really need to have the experts. You cannot allow amateurs to drive these complex cars or to be pilots of this plane.

Response: The so-called ‘experts’ – in whose care the good banker would place the society’s wellbeing – need to understand the real and pressing human needs of the society. Their claims of ‘dealing with complexity’ should not obstruct that crucial understanding of human needs.

Otherwise, the expertise becomes self-serving, and ‘amateurs’ soon see through the game.

10. Lessons learned: We have one lesson from history: openness helps … Openness is not just trade, openness is a mindset … that says “let’s get the best from everywhere, not only from what we produce’… let’s not allow short-term considerations and short-term satisfaction, which are psychological, to destroy the trade that gives us the fruits.

Response: It is not at all clear how ‘the one lesson from history’ is that ‘openness helps’.

In terms of material wealth, history teaches us that conquest, loot, slavery, colonization, exploitation et cetera increase the material wealth of a society – at least for a time. Technical prowess and trading skills also help, surely – until others catch up. But ‘openness’ helps? Really? How can anyone possibly say that that is the ‘one lesson’ from history?

The ‘fruits of trade’ mentioned here refer to material wealth, whereas other forms of satisfaction are denigrated as being merely ‘psychological’.

Is the satisfaction of ‘possessing wealth’ also not merely ‘psychological’? If a person enjoys fine wine, say, or the sight of a gold bar, the enjoyment lies in the person’s psyche, right? Indeed, is it not true that all forms of satisfaction and dissatisfaction are psycho­logical?

True ‘openness of mind’ should be defined not in terms of trade, but as the ability to see other human beings as also seeking their rightful share of happiness. Of this ‘openness’, with implies a generosity of spirit, not a trace appears in the interview.

11. More on leadership: And the role of the leader is to come and say, “Let’s make sure that it happens not only today and tomorrow, but also next year and the next century”. … we need to create the infrastructure and the world order that will bring it about …

Response: If, as seems quite possible, things do go wrong tomorrow, then today’s so-called ‘leaders’ will be busy passing the buck and getting out of harm’s way. After all, they have been doing their benefactors’ bidding much of the time – not actually ‘leading’.

And surely the part about ‘we need to create … et cetera’ is no more than a homily.

12. Efficiency and equity: … a very deep issue, which has been in debate for ages among economists: the trade-off between efficiency and equity. How can you ensure that when you are helping the society to be more equitable through transfers from the rich to the poor etc. that you also maintain efficiency in the economy so that you don’t cut the trade that gives you the fruits.

Comment: (1) Greek government accounts were doctored to hide the true levels of debt. (2) Sub-prime mortgages were bundled into ostensibly ‘highly rated securities’. (3) The Malaysian government fund MDB1 was extended a loan with the bank fee amounting to some fifteen percent; their erstwhile Prime Minster is facing fraud charges. (4) LIBOR rate was rigged for many years. (5) Big banks have been caught laundering money.

Are these the examples of efficiency the good banker has in mind? Are they not in fact examples of fraud and inequity? Is the good banker trying to teach us something?

When a rich person pays tax, it is not a transfer to the poor. It is an obligatory contribution to the running and future well-being of the society. Tax fraud is a crime.

If the economists need to debate about all these basic truths, then evidently the good banker has surrounded himself with paid yes-men, not honest economists.

13. False flag: What do I have in mind? I will take it to a paradox. Suppose that you cut half of the GDP, the product of the country, and you take that half and you distribute it equally to everyone. You will win the Nobel prize by saying “I have full equality”, but you have equality of misery.

Response: This no more that a classic ‘false flag’. Nobody has ever made that silly suggestion, and not even the Nobel jury is naïve enough to award a prize for that suggestion. Most Nobel Economics prizes go to people whom the good banker calls ‘experts’.

14. Role of the rich: How can you have a rise in the standard of living? By having people who are richer, saving, investing, broadening, increasing the size of the national pie so that we can distribute more to everyone, so if you are going just to tax the rich mindlessly, the rich, so-called, what will they do? They will say, “Why should I save? I am going to be taxed anyhow. So I will cut my saving. And I will give a big party. And we will sound happy, we will have more to consume.” … But for the next generation there will be less because we have not saved.

Response: At present, the largest proportion of global wealth is sloshing about from one financial centre to another, or from one tax haven to another, with the aim of avoiding taxation and getting the extra odd percent of return. The fraction of this global wealth being employed for the future betterment of any society is miniscule.

In other words, the rich are behaving in a way which utterly demolishes the good banker’s argument. They do not seem to be committed to any one society. Why would they invest in the future of any one society when they can hop from place to place at a moment’s notice?

15. Government: And why haven’t we saved? Because the government is about to tax us and distribute it. So, there are delicate issues of how to achieve social norms that bring about taking care of the poor and the equality and at the same time not destroying the future.

Response: An incredible amount of wealth is sloshing around the world today, seeking to avoid taxes and gain easy returns. It is not at all likely that this wealth will build any society’s future. Yet the statement has been made to instill fear in the hearts of ‘amateurs’; it is a psyop.

There is no mention in the interview of public infrastructure, health, education et cetera. These essential parts of a healthy society are NOT ‘handouts from the rich’. They are fundamental rights of all citizens. Politicians are expected to achieve these goals without raising taxes on the rich. Then the only option left to them is to borrow from the market – which just happens to be good business for the banks!

In short, ‘the rich’ prefer to lend to societies rather than be taxed. That way, future generations of the society will remain indebted to them.

16. Homily as deflection: … the key issue is equality of opportunities. We really must make sure that those who are underprivileged parts of the society have the opportunity to elevate themselves so that over time their children will be in a better part of the society … There will be a win-win because the nature of trade is a win-win project, the nature of trade is “I trade with you – you trade with me – both of us are better off.” And therefore, if we upset that equation, both of us are worse off, and the trade negotiations are the skirmishes about “who gets more of the overall benefits”.

Response: ‘We really must make sure that …’ – another avuncular homily. Anyway, who exactly is ‘we’ here?

To speak of ‘win-win’ projects in the presence of utter, dehumanizing deprivation is no more than ‘pie in the sky’. The audience’s understanding of issues is being seriously under­estimated.

The good banker needs to take a closer look at the reality on the main street: Talk to a few ‘excluded amateurs’, share a cup of coffee – and thereby get to know a few human beings outside of his immediate comfort zone.

17. Justification of solution: The only way to justify a trajectory that needs to be taken is by recognizing the damage of the alternative trajectory.

Response: So, when all is said and done, the best that ‘the experts’ can do is to suggest an alternative which is better than a disaster. Indeed, that is quite a letdown. Can the ‘experts’ not come up with a positive economic strategy which will be beneficial to us all? If they cannot, why should they even be called ‘experts’?

It seems that ‘avoiding an economic disaster’ is all that ‘the experts’ can achieve – and even in that they fail from time to time! Perhaps we do need right-thinking amateurs, after all, The whole idea of ‘expertise’ may be no more than a smoke-screen.

18. Concern for the world: I really think that the population of the world will benefit much more from openness than from closeness.

Response: The population of the world will also benefit from human dignity, local autonomy and democracy, freedom from exploitation and healthy communities. The idea of ‘openness’ must extend far beyond ‘openness of trade and finance’. It should include compassion for all life, and dignity for every human being on the planet.

Otherwise, we will end up with two worlds, not one: the 1% and the 99%.

***

Overall, the Chairman’s world-view appears definitely one-sided – and it happens to favour the group he represents. That should not surprise us, since almost all human beings espouse world-views which are skewed in their own favour; that is human nature. It is perfectly normal and legal to hold a world-view which is ‘tilted’ in one’s own favour!

However, the Chairman is also evaluating and advocating global policies with ostensibly noble and humanitarian objectives: To bring about a better world through greater wealth; to assure a future for the young; to achieve a ‘win-win’ world order for all … and so on and on.

It should go without saying – but, sadly, it does not! – that anyone advocating policies for the whole world should take special care to avoid any apparent conflict of interest between policies advocated for the greater good and one’s own self-interest.

Otherwise, the advocated policies can smack of self-serving rationalization, deflection, camouflage – or even outright deception. When speaking about ‘well-being of the world’, a much higher standard can be expected from those who gather at Davos and other such watering holes of the self-proclaimed caretakers of humanity.

It is hoped that, in the spirit of openness to ideas, this discussion will continue. So-called ‘Masters of the Universe’ regularly come up with self-serving arguments. But any right-thinking ‘amateur’ who is not in their pockets can easily demolish their arguments!

NOTE:

[1] Chairman of JPMorgan Chase International, interviewed on Sophie & Co, RT, link. Note that the specific TV channel which arranged and broadcast the interview is irrelevant here; presumably, the Chairman would have expressed the same views on any other media outlet.

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Dr. Naresh Jotwani is a semi-retired academic living in India and a member of the TRANSCEND Network for Peace Development Environment. Apart from part-time engagements in engineering education and consulting, he engages in an in-depth, personal exploration of how Gautam Buddha’s profound discoveries and teachings can be applied to the acute problems of modern life.

This article originally appeared on Transcend Media Service (TMS) on 4 Feb 2019.

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